Bonds are legal contracts that concern three distinct parties, the obligee, which is the party that requests the bond, the surety, which is the insurance company, and the bonded party, which is the client that seeks the bond.
It must be understood that a bond is not the actual insurance policy. The difference between insurance bonds and insurance is that the former will pay for damages due to failure of meeting conditions while the latter pays for damages caused by accidents.
In the case of surety bonds, this acts as a guarantee that the bonded party will keep to the obligations stated in the contract.
Such obligations can include respecting timelines for projects, performing tasks respecting certain codes, and other similar obligations.
The bond becomes void when the bonded party had met with all of the contract conditions; this means that both the surety and the bonded party must meet the conditions.
The obligee has the right to claim the respect of conditions and monitors the process of the contract.
There are numerous types of bonds and here are just a few:
- – Bid Bonds: Provide guarantees that certain individuals will sign the contracts when they are bidding and the bid is awarded to those people.
- – Completion Bonds: A guarantee that a project will be completed on or before a specific date, regardless.
- – Contractor License Bonds: Local and federal governments may request from certain contractors to have contractor bond, in order for the governmental body to grant a license for the contractor to operate at a particular place.
- – Customs Bonds. Required by the federal government (US Customs) from importers.
- – Jail Bonds: Guarantee that an individual will come back to jail/court on/ before a particular date.
- – License and Permit Bonds: A category of bonds, not a type. This category includes contractors’ bonds, auto dealers, brokers, and other types.
- – Auto Dealer Bonds: A bond required by many states for new ventures in the used car dealership.
- – Broker Bonds: A bond covering a wide range of brokers, like insurance brokers, mortgage brokers, real estate brokers, etc.
- – Fidelity Bonds: Guarantee the lack of harmful or dishonest acts of certain individuals (employees, for example.)
- – Fuel Tax Bonds: A bond to guarantee payment of truckers of fuel taxes sold in a particular area.
The price of bonds really depends on certain factors including the credit of the bonded party, the type of bond and the amount.
There are certain bonds that need credit and financial underwriting and you can find insurance companies competing with each other, so a bond that costs 150 with a company may cost 75 with a different company.